India's Department of Industrial Policy and Promotion (DIPP) has approved British retailer Tesco PLC's application to invest in Tata-owned Trent Hypermarket Ltd.
According to Economic Times, DIPP's approval will pave the way for the clearance of the first foreign investment proposal in multi-brand retail by the Foreign Investment Promotion Board (FIPB).
The DIPP vets all foreign investment proposals in the retail sector before they are sent to FIPB. FIPB is the inter-ministerial body that clears foreign direct investments in sectors where government permission is required, the report said.
Tesco proposed to take a 50% stake in Trent Hypermarket. The retail chain is currently owned by Indian conglomerate Tata Group. Tesco initially planned to invest $110 million in Trent Hypermarket, Economic Times said.
Out of its total $110 million investment, the UK retailer will invest $90 million to subscribe to equity shares of its joint venture with Tata Group, Tent Hypermarket Ltd. The remaining $20 million will be used to acquire existing equity from Trent Hypermarket. Trent and Tesco will each hold a 50% stake in the joint venture after the induction of foreign equity, the report said.
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